Moldova’s Political Crisis: A Problem of the EU’s Own Making

On Moldova’s current crisis, the EU’s role in facilitating its state capture, oligarchs, and the country’s competing pro-EU political forces.

Out on the distant fringe of the Balkans, The Republic of Moldova not only struggles to cope with its longstanding breakaway state of Transnistria, but now faces a political crisis with two rival presidents vying for power. Although the small country of under three and a half million people rarely makes the headlines, the road to this impasse has been an interesting and often counter-intuitive one. No small part in precipitating the crisis has been played by the EU.

On the 8th of June, three months after parliamentary elections, a surprise coalition government was formed between President Igor Dodon’s pro-Russian Party of Socialists (PSRM) and the ACUM, an alliance of two staunchly pro-EU, anti-oligarch parties. The intent of this unorthodox coalition is to unseat the also pro-EU Democratic Party of Moldova (PDM) from its deeply entrenched position of power.

The PDM is the creature of Vladimir Plahotniuc. While other post-Soviet states like Ukraine and Russia continue to suffer under the influence of powerful and conflicting factions of oligarchs, Plahotniuc manifests an even more acute problem for Moldova, that of state capture by a single hegemonic oligarch. State capture occurs when the institutions of state serve the interests of a private actor rather than those of the state.

Despite holding no government position himself, Plahotniuc’s power runs deep through all levels of the government, courts and economy. This power was evinced on the 9th of June, one day after the coalition challenging him was formed, when Moldova’s constitutional court declared the PSRM-ACUM coalition invalid and ostensibly removed President Dodon from power. The court replaced Dodon with Plahotniuc’s close ally and current PM Pavel Filip, who immediately moved to dissolve the government and call new elections for September 6th. The EU and Russia have both declared support for the democratically elected government, contradicting the actions of the Constitutional Court and of Filip. The Romanian government, deeply influential in Moldova, has sided with Plahotniuc’s PDM. It remains unclear how the situation will develop and what the fate of Moldova’s nearly three and a hald million citizens will be. But how did it come to this?

There are two facts which make the current situation especially surprising. In 2017, between Dodon’s election to the presidency and the recent parliamentary election, it appeared that the two dominant parties, Dodon’s PSRM and Plahotniuc’s PDM, collaborated to pass electoral reforms. These were designed to restrain the share of representation that smaller parties like the PSRM’s new odd bedfellows, the ACUM, could achieve. In all likelihood, Dodon, lacking the outright parliamentary majority he had hoped for, believes he can use the coalition with the ACUM to wrest power from Plahotniuc.

Both the ACUM and the PDM are pro-EU forces. The ACUM is, however, fiercely opposed to the state capture enjoyed by Plahotniuc. The alliance grew out of outrage toward Moldova’s 2014 Bank fraud scandal, when one billion dollars, a sixth of the country’s GDP, was siphoned out of the banking system. The government rescued the banks with $870 000 in taxpayer money, leaving a major hole in the state’s finances. Although arrests were made, including an ex-prime minister, most suspect Plahotniuc to be the main beneficiary of the scandal and puppet master of the subsequent judicial proceedings. The handling of the scandal by the pro-EU government of the time led to a precipitous drop in support for EU accession among Moldovans, from three quarters of those polled to a third. It also led to the election of Russia-friendly Dodon. Nevertheless, EU support for the pro-European old guard of the PDM has soldiered on as it seemed to be the only capable force keeping Moldova out of Russia’s sphere of influence.

The EU has a lot to answer for in contributing to the current crisis and for Plahotniuc’s grip on power. Shortly after the Russia-Georgia war of 2008, the EU stepped up involvement in its post-Soviet periphery. Directed at states in this region, including Moldova, the EU’s Eastern Partnership Initiative (EaP) was drafted shortly after the Russia-Georgia war. It was formulated by Sweden’s Carl Bildt and Poland’s Radosłav Sikorski, two politicians long committed to reducing Russia’s influence in Europe. At the inaugural summit of the EaP, Sikorski characterized the initiative as designed to have “the ability to get what you want through attraction rather than coercion and payment.” Nevertheless, the initiative saw millions of dollars flow into countries like Moldova from the EU to fund various democratization projects and help resolve existing conflicts, such as that with breakaway Transnistria. The EaP was not conceived as a path to EU accession, and lacked the incentive to reform that such a promise would have. However, along with the claim that the EU was to ‘get what it wants’ through attraction rather than payment was the declaration that all funding was to be given on the basis of conditionality. This meant that if progress was not made toward democratization, conflict resolution and fighting corruption, the funding was meant to be withheld. Funding from the EU to Moldova jumped from 40 million euros in 2007 to 130 million in 2014. However, Geopolitical rivalry with Russia trumped liberal ideals. ‘Our bastards’, primarily Plahotniuc, continued to receive financial support even as Freedom House’s democratization metrics for Moldova steadily declined year after year.

Entrenched oligarchy and state capture were first established in Moldova on the industrialized left bank of the Dniester. Roughly two thirds of Moldova’s population speak Romanian, although about half of these insist that the Moldovan people and language are distinct from the Romanian. Most of the remaining third are native Russian speakers or largely pro-Russian Gagauz. The proportions on the left bank, Transnistria, are reversed. There, Moldova’s Soviet-era industry is concentrated and largely staffed and managed by graduates of technical institutes which, in the Soviet era, taught only in Russian.

During Perestroika in the 1980s, Moldovan support for a return to the wartime union with Romania rose and the Romanian flag and anthem were adopted as Moldovan state symbols. The Transnistrian nomenklatura realized that unification with Romania would lead to the loss of their powerful and lucrative control of industry. Already following the Russian and Ukrainian trend of redefining themselves into post-Soviet oligarchs, the nomenklatura instrumentalized the Soviet rhetoric of friendship of nations to win popular support in contrast to the fascist nationalism of the Romanian unionists. Even before the USSR fell, they declared Transnistria’s independence, which they successfully defended during the 1992 war in which Chisinau tried to regain control. Transnistria’s separatists benefited from having been host to the Soviet 14th Army, which was meant to be well enough supplied to sweep down and capture Istanbul within a week. An unrecognized, oligarchic captured state draped in Soviet iconography has survived in Transnistria ever since.

The Transnistrian oligarchy is not a simple puppet of Moscow. Their insistence on accession to the Russian Federation has been persistently ignored in Moscow. The Kremlin has consistently supported Moldova’s territorial integrity, preferring to pursue influence over the country in whole, with its entire Russian-speaking electorate. The limit of Moscow’s was evinced when its chosen candidate lost the 2011 Transnistrian election. Besides, the EU has usurped Russia’s role as both Transnistria and Moldova’s major trade partner.

Privatization is the crucible in which post-Soviet oligarchy is forged. Having lost control of Transnistria’s heavy industry, Moldova was left with few valuable assets other than its state farms. These provided less incentive for the rapid emergence of a hegemonic, rent-seeking oligarchy than there was in Transnistria or further east. After the collapse of the USSR, the centralized coordination, maintenance and supply of Moldova’s state farm network broke down, leading to severe, widespread poverty. The crushing desperation of the 90s led Moldovans to elect the Communist Party back to power in 2001, the only such instance in the former Eastern Bloc.

However, the Communist Party represented the clientelistic regime of president Voronin and his family. Both current president Dodon and state captor Plahotniuc owe their rise to power to their ties to the Voronin clan during this era, in which privatization and the rise of the oligarchy really took off. Plahotniuc claims to have gotten his start in wine exports from the newly privatized vineyards, but he his alleged to have made much of his early fortune from human trafficking.

Although the Communist Party adopted a pro-EU position in 2005 to capture a larger electoral constituency, violent protests at election fraud in 2009 brought a coalition of three new pro-EU parties to power, one led by Plahotniuc, who would later outmanoeuvre his rivals in the coalition to monopolize power. All the while, EU money kept flowing in, despite the new regime’s closure of legitimate media outlets tied to the Communist Party and despite Plahotniuc’s creeping control of the the executive, ministries, state agencies, legislature, judiciary, and even the anti-corruption bodies. Shortly after he consolidated power, state institutions and major state-owned companies like Moldtelecom and Moldova-Gaz all suddenly moved their accounts from the state-owned Banca de Economii to Plahotniuc’s VictoriaBank. Plahotniuc was able to use the judiciary and anti-corruption bodies, well funded by the EU, as weapons against his rivals.

With the Ukraine crisis of early 2014, the EU’s geopolitical fears further usurped liberal ideals like the conditionality of the funding meant for judicial and anti-corruption reforms. With democratization indicators steadily falling, in April 2014, shortly after the crisis in Ukraine, Moldova was granted visa-free status by the EU. An EU-Moldova association agreement was also signed at this time. This stipulated a Deep and Comprehensive Free Trade Agreement, which came into effect in 2016, with at best mixed results for the Moldovan SMEs it was meant to benefit. All the while, Plahotniuc consolidated not only his control of state institutions, but of industries like tourism, oil, real estate, and mass-media. His legitimacy on the international stage was bolstered by direct ties to western institutions and individuals like former US Assistant Secretary of State Victoria Nuland.

To its credit, or, if you like, too little too late, in 2015 the EU Commission published a paper recognizing the failure of its policies toward Moldova. The paper accurately recognized that the EU had imposed a prescriptive liberal democratic reform plan without taking account of the nuances of local socio-economic conditions. The paper failed to recognize that it had trampled its own ideals, like conditionality, out of geopolitical interest. However, in the same year, the EU finally did briefly suspend funding. Ironically, the motivation for this was not the glaring evidence of oligarchic state capture on every level, but rather the failure of parliament to form a government. In October 2018 the European Parliament’s Committee on Foreign Affairs finally adopted a resolution that Moldova was a state captured by oligarchic interests, and that EU funding should be withheld until the parliamentary elections a few months later. The resolution did not recognize the roll the EU played in facilitating state capture. The horse had bolted from the pen, but the EU Commission did finally cut some funding to Moldova.

Besides failing to follow its own standards on the conditionality of funding, the EU had put all its eggs into the basket of the tri-party coalition which Plahotniuc came to dominate. This robbed itself of leverage and made it beholden to its supposed clients. It gave itself no contingency plan, no alternative or way out. The results were never lost on the Moldovan people. There has been a steep drop both in Moldovan support for the EU and for its local ‘agents of change’.

Meanwhile, Russia has ironically benefitted from the EU’s geopolitical chess moves. If Plahotniuc’s forces come out on top in the current crisis, the captured Moldovan state will meet no standard for further integration into western institutions for the foreseeable future. Voter support for Dodon’s pro-Russian socialists will likely grow. Any failure of liberal western policy hands the Kremlin a free propaganda narrative, the ability to plausibly paint western institutions as hypocritical, elitist and ineffective. If Dodon and the ACUM come out on top, both the president and larger member of the governing coalition will be ostensibly pro-Russian. If the Kremlin and Dodon can finally wrangle the peaceful reunification with Transnistria that they both openly pursue, the pro-Russian constituent of the Moldovan electorate will become formidable.

For now, the outcome of the crisis and the ramifications that it will have for the lives of the Moldovan people remain uncertain. What is clear is that the EU’s cosiness with oligarchy and the contradiction between its liberal internationalist ideals and its geopolitical interests can have unintended consequences for nations even beyond the EU’s borders.

Jonathan Trefz is a freelance writer living in Belgrade. Originally from Victoria, British Columbia, he has an MA in European and Eurasian Affairs from the University of Toronto. He has spent 15 years living in and struggling to understand places like Moldova, Russia, China, and Saudi Arabia. jtrefz@yandex.ru, Telegram: @jtref